Scrooge the Economist's Idea for Screwing Minimum Wage Workers

It appears that Americans may soon, at long last, get an increase in the federal minimum wage. The public is for it. Economists are for it. And today, Republican opponents may have generated their most outrageous counter-proposal yet.

The classic conservative objection to increases in the minimum wage is that it will cause job losses, as employers cut their payrolls to make up for the increased wages. The latest economic research, however, find that that assumption is false—incremental wage increases only raise prices very slightly, and help employers by reducing employee turnover without causing very many job losses.

The minimum wage today stands at $7.25 an hour, a much lower percentage of the median wage than we had when our parents were kids. It is simply not enough money for someone to live on, much less support a family. Now, as it appears that the minimum wage increase will actually happen thanks to swelling political and public support, those who oppose it are shifting from simply dismissing the idea to searching desperately for proposals that could mitigate its impact on the monied class of employers.

Even by the standards of the Wall Street Journal op-ed page, I must say that today's alternate minimum wage proposal, from the conservative economist (and former Reagan advisor) Martin Feldstein, is jaw-dropping. He suggests—not as some wacky thought experiment, but as an actual policy proposal— that the welfare payments we send to our poorest citizens be morphed into a subsidy for employers which can be subtracted from the wages of these employees (who are by definition the poorest employees in America!). Specifically:

There is a better way to help those with low skills find employment and
raise their incomes: Integrate the existing minimum wage with welfare
payments. Consider a woman who receives $10,000 a year from various
transfer programs but can only find occasional part-time work at the
$7.25 minimum wage. Her $10,000 a year of transfer benefits is
equivalent to $5 an hour based on 2,000 working hours per year. If she
had the option of treating up to half of that $5 as an offset to the
minimum wage—just as workers who receive tips can offset part of the
minimum-wage floor because of their tip income—she could legally take
any job that paid at least $4.75 an hour. If she finds a job paying $5
an hour, she might earn an extra $10,000 a year.

To be perfectly clear here: Martin Feldstein suggests that Americans who are poor enough to receive welfare and food stamps should be paid less than minimum wage, so that business owners and corporations can save money by hiring them.

Martin Feldstein teaches at Harvard, but he should probably spend some time working at McDonald's.